GREENERGY HAS announced that it is almost ready to start construction on a biodiesel plant in Humberside that would process thousands of tonnes of UK rapeseed.

The oil and biofuel company, which has annual sales of £400m excluding fuel duty, said it had signed a memorandum of understanding with backers for the £10m plant. 

Shareholder Tesco is the key backer, along with cereals traders Louis Dreyfus and Grainfarmers.

“The deal with Tesco goes a long way towards financing the project, and talks with Louis Dreyfus and Grainfarmers are far enough down the line to go public,” said head of communications Alex Lewis.

But she denied that there were any marketing tie-ups with the backers, either to supply the rape oil to make biodiesel, or to sell the finished product to motorists.

“Their support was based on the strong business case behind the project.

“The economics of producing biodiesel with its 20p/litre tax break have improved because of the high price of normal diesel, which has mitigated the additional cost of producing biofuel.”

Even with the break, there had previously been an 8p/litre shortfall to sell at parity, but that was no longer the case, added Mrs Lewis.

With diesel prices remaining high for the foreseeable future, the economics of production were sound, she said.

The new plant is slated for completion by summer 2006, and will come on line with a capacity of 100,000t a year.

It will blend 50-75% rape oil with used cooking oil and imported oils to produce bio-diesel for domestic consumption and export.